Devising a Growth Strategy for Pakistan (7): New Growth Framework Approved

Posted on May 29, 2011
Filed Under >Adil Najam, Economy & Development
15 Comments
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Adil Najam

On Saturday, the National Economic Council approved the New Growth Framework based on the New Development Approach developed by the Planning Commission of Pakistan.We at ATP have been following and encouraging a discussion on the elements of the new growth framework over the last many months and prior to this have carried six posts on the subject: here and here and here and here and here and here.

The latest draft of the strategy is available here and we hope that the final draft – the one approved – will soon also be available on the Planning Commission website. We would, again, encourage our readers to comment on, discuss and debate its elements. One can quibble with the details of the content – one always can in a document like this – but it is better to quibble than to remain silent. In many ways as important as the content of the strategy is the fact that its architects have made great efforts to create a dialogue around its content and a public conversation around the need to think of a framework for economic development. The intensity of this effort is new, and it is heartening.

Yet, it is also clear that this has not been the best of times to create such a dialogue. The gyrations of politics and security have kept everyone fully engaged – in fact, more than fully – and issues of long-term development planning have been relegated not only by the media but in the public imagination. That, of course, is a terrible irony because ultimately – and contrary to what so many of our pundits seem to believe – many of our existential challenges of politics and security will be decided on the anvil of development, rather than the other way around!

One hopes that the new growth strategy prepared by the Planning Commission will get the attention it deserves, including by government itself. One hopes that its passage means that there is actual buy-in for its content and not merely a proforma nod. Even more than that, one hopes that our intelligentsia – so engrossed in spinning webs of conspiracy, intrigue, and zealous passion for high politics – will also take a minute to think about it and engage in the development debate. It may sound boring when you can bring yourself into a frenzy about global intrigue and wikileaks, but it may have a much more real bearing on the future of our state and society.

Here, then, is an excerpt from an editorial opinion on the new strategy, written by Dr. Farrukh Saleem:

Let’s … look at our constraints: Our gross domestic savings are Rs1.5 trillion but we need to invest in excess of Rs3.5 trillion just to keep pace with our ballooning labour force.

In essence, we have little or no money to invest in physical infrastructure-brick, mortar, machinery and equipment. So what do we do? The new growth strategy’s recommendation is to focus on “economic governance, institutions, incentives and human resources.” The new focus does not need huge amounts of capital and still generates growth-growth that we cannot live without.

How can the new growth strategy generate growth? Two solid propositions: Increase productivity of investment plus elevate profitability of private investment. Again, neither of the two requires huge amounts of capital and yet is bound to generate growth-growth that we cannot live without.

How can productivity of investment be improved? Two specific recommendations: Increase competitiveness and ease entry and exit. How can profitability of private investment be increased? Three concrete steps: Improve investment climate; reduce cost of doing business; dissolve impediments to entrepreneurship.

How can investment be encouraged? Three substantial undertakings: Commercial judicial system, taxation system and the bureaucracy. Villages won’t give us growth, cities will. The new strategy proposes a complete transformation of our highly restrictive zoning laws that have “impeded the growth of domestic commerce and hampered the role of cities as generators of economic growth.”

Agriculture won’t give us employment growth, the services sector will. Is the government listening? In less than a week, the budget will answer that question. Who is right? The Planning Commission or the government? Remember; it is dangerous to be right when the government is wrong.

And here is a news report from The Express Tribune on the approval of the strategy:

The National Economic Council (NEC) on Saturday approved a new growth framework, promising to convert the country from a security state into a welfare state by replacing a model ruined by strong government footprints in markets and bureaucratic red-tapism. Prime Minister Syed Yousaf Raza Gilani has authorised the Planning Commission to devise an implementation plan over the next four months by taking into confidence the four provinces and relevant stakeholders, an official told The Express Tribune after the NEC meeting.

The federal cabinet on Friday approved seven million pounds (Rs984 million) of grant offered by the Department for International Development of England, which will be spent on implementing the growth strategy, the official added. Earlier, the finance ministry had blocked the approval of the grant due to a tussle with the Planning Commission. The matter was referred to the Law Division which sent it for the cabinet’s approval. The official said UK Minister for International Development Andrew Mitchell, during his upcoming visit to Islamabad in June, will sign the grant agreement. The World Bank will work as an administrator, he added.

“Due to flat per capita income and less-than-desired growth, poverty is on the rise in the country,” said Planning Commission Deputy Chairman Dr Nadeemul Haq, adding “the current model could not sustain a growth rate which could create jobs for the labour force growing at a rate of 3.6 per cent annually.”

“If Pakistan wants to achieve an average seven per cent growth to create jobs for new entrants in the market, it will have to implement the new growth strategy at any cost,” said Finance Minister Hafeez Shaikh. He said under the new economic framework, the government’s role in economy will be redefined in order to restrict its functions to only policy-making and regulation and leaving management with the private sector. Shaikh said professionalism and managerial improvement in the government working will also be ensured. “The strategy will ensure that the cities serve as an engine of growth and will be interlinked with the rest of the world,” he added.

Nadeemul Haq, who is the main architect of the framework, in his presentation to the NEC highlighted the flaws of the current growth model. The current growth strategy limits the best use of assets, revolves around large government role in businesses as evident from public sector enterprises and wants protectionism in markets.

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15 responses to “Devising a Growth Strategy for Pakistan (7): New Growth Framework Approved”

  1. shahid says:

    A brave man is killed because he dared to speak what some cowards wielding power did not want the silent majority to hear.

    The cowards are gloating with happiness that some other brave person will be terrorized in keeping silent

    The cowards are celebrating the kill.

    A black day for humanity and Pakistan.

  2. shahid says:

    It will be useful to understand how some poor economies prospered including those of China, India, Brazil and the Eastern Tigers.
    Some of the common themes in the development of these countries need to be incorporated.
    The most important could be urgent land reforms, standard universal education and correcting fiscal and financial aberrations

  3. izaz says:

    @wsd..on the alternate leadership…

    [name your favorite here] is the answer.

  4. ikhlaque Chan says:

    Pakistan should make it easier for overseas pakistani to start business. Me and many of my friends have tried hard.
    Our efforts ends after years of exhausting struggle against incompetent and corrupt government officers. And often political interest also stands in the way. Like protecting influetials with similar concepts.
    In this way Pakistan misses a lot of free growth.

    If the business incentives were easy, straight forward, and welcoming, then more people would invest.

    Pakistani politicians like to talk about how investment friendly Pakistan is. But the truth is that all multinationals and others have to make agreements behind curtains.
    And private small scale investment is unwanted, by the way system works now.

    Let small scale investment get easy access to the market, it will grow. And the sum of many small scalers will become a boom!

    Its easy!

  5. NAEEM says:

    Can someone please point me to where I can get a full copy of this new strategy.

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